In one of the first important cases to gauge the consequences of the Supreme Court’s physical takings decision in Cedar Point Nursery, the Court of Appeals Second Circuit, in two linked cases has upheld recent amendments to New York City’s rent stabilization law against a claim that is a facially invalid violation of the takings clause applicable to the states through the fourteenth amendment. Community Housing Improvement Program v. City of New York, 2023 WL 1769666 (2d Cir. 2023); 74 Pinehurst LLC v. City of New York, 2023 WL 1769678 (2d Cir. 2023). The court ruled that the law, at least on its face, was neither a physical taking under the Loretto/Cedar Point line of cases nor a regulatory taking under the Penn Central line of cases.
The physical taking claims were that the law (the New York City Rent Stabilization Law, as amended in 2019 in the Housing Stability and Tenant Protection Act of 2019) effected a physical invasion of the property of landlords because (1) it limited landlords to recovering only one of their units for pesonal use upon a showing of necessity, with additional restrictions depending on whether the tenant is elderly or has a disability; (2) it limits (but does not eliminate) landlord powers to evict tenants by requiring proof of nonpayment of rent, creating a nuisance, violating reasonable lease provisions, or using the property for illegal purposes); and (3) allowed tenancies in some cases to be transferred by tenants to family members who had been living in the unit for at least two years, among other requirements. Nor could the plaintiff prevail on a facial challenge by arguing that the law has a substantial economic impact on landlords or interferes with their investment backed expectations, partly because the law has existed — and been repeatedly amended — since 1969 so landlords should have known that requirements might change and that landlord-tenant law is an area of heavy regulation.